July 19, 1993
CLA-2 CO:R:C:T 954212 chCATEGORY:CLASSIFICATION
Gwen H.R. Salisbury
Compass Forwarding Co., Inc.
19518 Pacific Highway South
Seattle, Washington 98188RE: Applicability of partial duty exemption under HTSUSA subheading 9802.00.80 and labeling requirements for photograph frames and trinket boxes covered with silk; dyeing; cutting-to-shape.
Dear Ms. Salisbury:
This is in response to your letter of January 7, 1993, requesting that we rule on the applicability of a partial duty exemption under subheading 9802.00.80 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) to certain photograph frames and trinket boxes. In addition, you inquired whether the country of origin for these finished articles is Thailand. Please reference your client, Fraje Limited.FACTS:
Fraje purchases silk (which is produced abroad) from U.S. wholesalers. In the U.S., the silk undergoes a hand-designed marbleizing technique and is cut into 36 inch squares. It is stated that each 36 inch square of silk will be used to manufacture more than one article. In Thailand, these squares are cut and assembled with other components into textile covered photograph frames and trinket boxes. With the exception of the silk, all components used to fabricate the finished trinket boxes and photograph frames are manufactured in Thailand.
The finished photograph frame is rectangular in shape and measures approximately 7.5 x 10 inches. It is constructed of cardboard which is covered with a marbleized piece of dyed silk fabric bordering 1.75 inches around the edge of the front of the frame. A plastic foam padding is inserted between the fabric and cardboard. A plastic overlay is placed in the center to protect the photo area. The back portion of the frame is covered with a gray polyester fabric. A hinged piece of the cardboard is attached to the back as a stand.
The trinket box is constructed of the same materials as the frame. It is shaped in the form of a hexagon, and measures approximately 2.5 inches wide and 1.75 inches deep. It is completely covered with the textile materials, except the lid which is covered with the silk. From the samples, it appears that in Thailand the silk for the photograph frame is cut into a square the size of the outside edge of the frame, and that another smaller square is cut inside the larger square to form the frame cover. The silk for the trinket box appears to be cut in a hexagonal shape.ISSUES:
1. Whether the photograph frames and trinket boxes will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUSA, when returned to the U.S.?
2. Whether the country of origin for the photograph frames and trinket boxes is Thailand?LAW AND ANALYSIS:
Partial Duty Exemption
Subheading 9802.00.80, HTSUSA, provides a partial duty exemption for:
[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting.
All three requirements of subheading 9802.00.80, HTSUSA, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).
For a component to be eligible for subheading 9802.00.80, HTSUSA, treatment, it must first be a "product of the United States." According to section 10.12(e), Customs Regulations {19 CFR 10.12(e)}, a "product of the United States" is an article manufactured within the Customs territory of the U.S. and may consist wholly of U.S. components or materials, of U.S. and foreign components or materials, or wholly of foreign components or materials. If the article consists wholly or partially of foreign components or materials, the manufacturing process must be such that the foreign components or materials have been substantially transformed into a new and different article, or have been merged into a new and different article.
According to T.D. 90-17, 24 Cust. Bull. 34 (1990), the principles of country of origin for textiles and textile products contained in section 12.130, Customs Regulations (19 CFR 12.130), are applicable to such merchandise for all purposes including duty and marking. The country of origin of textile products is deemed to be that foreign territory, country, or insular possession where the article last underwent a substantial transformation.
According to 19 CFR 12.130(d)(2), the following factors are to be considered in determining whether merchandise has been subjected to substantial manufacturing or processing operations; the physical change in the materials or article, the time involved in the manufacturing or processing operations, the complexity of the other operations, the level or degree of skill and/or technology required, and the value added to the article.
The issue here is whether marbleizing the silk and/or cutting it into 36 inch squares in the U.S. constitutes a substantial transformation. Customs has held that under certain circumstances the cutting of fabric into specific patterns and shapes suitable for use to form the completed article constitutes a substantial transformation. See Headquarters Ruling Letter (HRL) 731028 dated July 18, 1988 (cutting of fabric into garment parts for wearing apparel constitutes a substantial transformation). However, we have ruled that surgical towel fabric which is cut to length and width, and then hemmed is not substantially transformed into a product of the country where the operations were performed. See HRL 555719 dated November 5, 1991.
In HRL 556015 dated May 20, 1991, fabric made in Hong Kong was shipped to the U.S. where it was cut into simple geometrical shapes, including triangles, squares, and trapezoids. The cut pieces were then shipped to Jamaica where they were sewn into duvet covers. It was held that the Hong Kong-origin fabric was not substantially transformed into a product of the U.S., and therefore, was not eligible for an allowance in duty under subheading 9802.00.80, HTSUSA. See also HRL 555648 dated July 16, 1991, (foreign-origin fabric cut to length and width remained a product of the country where the fabric was manufactured, and was precluded from receiving subheading 9802.00.80, HTSUSA, treatment).
Therefore, in this case, cutting the silk into 36 inch squares is more analogous to cutting fabric for toweling, which is not as complex as cutting specific patterns; making squares simply involves cutting straight lines similar to cutting toweling fabric to length and/or width. Consequently, the cutting of the foreign-origin silk in the U.S. is not a substantial transformation, and the pieces cut out of foreign silk would be considered a product of the country where the silk was manufactured, not a fabricated U.S. component which is eligible for tariff treatment under subheading 9802.00.80, HTSUSA.
With regard to the marbleizing technique performed in the U.S., section 12.130(e)(2), Customs Regulations {19 CFR 12.130(e)(2)}, provides that the articles or materials usually will not be considered to be a product of the particular country by virtue of merely having undergone one or more finishing operations or having been dyed and/or printed in that country. However, an article or material usually will be a product of the particular country where it has been both dyed and printed when accompanied by two or more of the finishing operations enumerated in 19 CFR 12.130(e)(1)(i).
In C.S.D. 90-29, 24 Cust. Bull. 350 (1990) (HRL 732673 dated November 6, 1989), it was held that greige terry toweling which was bleached, cut to length and width, hemmed, desized, and dyed to create beach towels was not substantially transformed. See also HRL 079909 dated June 4, 1987, (the process of dyeing has been held not to result in a substantial transformation); and HRL 556793 dated October 1, 1992, (foreign-sourced yarn imported into Costa Rica where it was dyed, wound on a plastic cone, and lubricated with a silicon/wax mixture constituted mere finishing operations that fell short of a substantial transformation under 19 CFR 12.130(e)(1)(i); accordingly, the yarn was considered a product of the country where the yarn was formed). Therefore, we find that the marbleizing technique performed in the U.S. does not substantially transform the silk into a product of the U.S.
With regard to marbleizing the silk and cutting it into 36 inch squares in the U.S., in HRL 555734 dated March 20, 1991, we considered the use of foreign fabric imported into the U.S. where it was dyed or printed, slit to a required width, and sent to Haiti to be incorporated into a quilted bedspread. Based upon 19 CFR 12.130(e)(2)(ii) and (v) which provides that a textile article or material usually will not be considered to be a product of a particular country by virtue of merely having undergone either "cutting to length or width and hemming or overlocking fabrics which are readily identifiable as being intended for a particular commercial use", and "dyeing and/or printing of fabrics or yarn," the foreign fabric imported into the U.S. was not considered a "product of the U.S." See also HRL 085336 dated December 20, 1989, (flowers imported into the U.S. in bulk, sorted, cleaned, cut to length, dyed, centrifuged, and dried were not substantially transformed into a product of the U.S. even though the dyeing, painting or heating clearly imparted a physical change to the flowers and made them more suitable for retail sale, because the fundamental character of the products was not changed by the processing); and HRL 555719 dated November 5, 1990, (fabric imported on bolts from South America and dyed and cut to length and width in Barbados, was not considered a substantial transformation of the fabric in Barbados). Therefore, we find that cutting and marbleizing the silk in the U.S. does not substantially transform it into a product of the U.S. pursuant to 19 CFR 12.130(e)(2)(ii), thereby rendering it ineligible for the partial duty exemption available under subheading 9802.00.80, HTSUSA.
As we are unaware of any other tariff provision under which the photograph frames and trinket boxes would receive a duty exemption, the articles will be dutiable on their full value when imported into the U.S.
Country of Origin for the Finished Articles
Country of origin determinations for textile products are subject to Section 12.130 of the Customs Regulations (19 CFR 12.130). Section 12.130(b) provides that a textile product that is processed in more than one country or territory shall be a product of that country or territory where it last underwent substantial transformation. A textile product will be considered to have undergone a substantial transformation if it has been transformed by means of substantial manufacturing or processing operations into a new and different article of commerce.
Section 12.130(d) of the Customs Regulations sets forth criteria in determining whether a substantial transformation of a textile product has taken place. This regulation states that these criteria are not exhaustive; one or any combination of criteria may be determinative, and additional factors may be considered.
Section 12.130(d)(1) states that a new and different article of commerce will usually result from a manufacturing or processing operation if there is a change in:
(i) Commercial designation or identity,
(ii) Fundamental character or
(iii) Commercial use.
In this case, silk which has been hand marbleized and cut into 36 inch squares is exported from the U.S. to Thailand. In Thailand, the silk is cut to specific size and assembled with other components of Thai origin into finished picture frames and trinket boxes. Thus, the operations performed in Thailand change the commercial identity of various raw materials into finished products.
Section 12.130(d)(2) of the Customs Regulations states that in determining whether merchandise has been subjected to substantial manufacturing or processing operations, the following will be considered:
(i) The physical change in the material or article as a result of the manufacturing or processing operations in each foreign territory or country, or insular possession of the United States.
(ii) The time involved in the manufacturing or processing operations in each foreign territory or country, or insular possession of the United States.
(iii) The complexity of the manufacturing or processing operations in each foreign territory or country, or insular possession of the United States.
(iv) The level or degree of skill and/or technology required in the manufacturing or processing operations in each foreign territory or country, or insular possession of the United States.
(v) The value added to the article or material in each foreign territory or country, or insular possession of the United States, compared to its value when imported into the United States.
Customs Regulation 12.130(e)(1) provides, in pertinent part, that:
An article or material usually will be a product of a particular foreign territory or country, or insular possession of the U.S., when it has undergone prior to importation into the U.S. in that foreign territory or country, or insular possession any of the following:
(iv) Cutting of fabric into parts and the assembly of those parts into the completed article.
We have already determined that merely cutting the silk into 36 inch squares in the U.S. does not constitute a substantial transformation. However, the silk is cut to specific size in Thailand. In order to complete the picture frame, it is necessary to cut the silk so as to form a 1.75 inch border. To accommodate the trinket box, the silk is cut to size and fashioned into the shape of a hexagon. Hence, we conclude that the cutting of the silk in Thailand is sufficiently complex so as to constitute a substantial transformation and render it a product of Thailand.
Moreover, the other components of the finished articles are manufactured in Thailand. These items include a foam padding, a plastic overlay, gray polyester fabric and cardboard. Therefore, the finished articles are composed of materials substantially transformed or manufactured in Thailand. Finally, the components are assembled in Thailand. Pursuant to Customs Regulation 12.130(e)(iv), the country of origin for the trinket box and picture frame is Thailand.
The textile products in question must satisfy the labeling requirements of section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304) and Part 134, Customs Regulations (19 CFR Part 134) administered by the Customs Service and the Textile Fiber Products Identification Act (15 U.S.C. 70 through 70k) administered by the Federal Trade Commission.
Section 304 requires with certain exceptions, that every article of foreign origin (or its container), imported into the United States be legibly and conspicuously marked in such a manner as to indicate to an "ultimate purchaser" in the United States, the English name of the country of origin of the textile.
Part 134 of the Customs Regulations, implements the country of origin marking requirements and exceptions of section 1304. Section 134.41(b), Customs Regulations (19 CFR 134.41(b), requires that the marking be conspicuous enough that an ultimate purchaser will be able to find the marking easily and read it without strain. That section further provides that the degree of permanence should be at least sufficient to insure that in any reasonably foreseeable circumstance the marking shall remain on the article until it reaches the ultimate purchaser unless it is deliberately removed. Any method of marking which is sufficiently permanent is acceptable.
In this case, affixed to both articles are sticker labels. The picture frame is labeled "Made in Thailand," which appears on the front of the frame under the plastic overlay. The trinket box is labeled "100% Thai Silk, 100% Soie Thai, Made in Thailand," which appears on the bottom of the box. Both labels are conspicuous, legible and securely affixed. Therefore, they satisfy the labeling requirements outlined above.HOLDING:
1. On the basis of the information and samples submitted, it is our opinion that the silk which is manufactured abroad and purchased in the U.S., where it undergoes a hand-designed marbleizing technique and is cut into 36 inch squares, is not substantially transformed into a "product of the United States." Therefore, no allowances in duty may be made under subheading 9802.00.80, HTSUSA, for the cost or value of the silk incorporated into the frames and trinket boxes when they are returned to the U.S.
2. The country of origin for the completed trinket box and picture frame is Thailand.
This country of origin determination applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 177.9(b)(1), Customs Regulations (19 CFR 177.9(b)(1)). This section states that a ruling letter is issued on the assumption that all the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. Should it subsequently be determined that the information furnished is not complete and does not comply with 19 CFR 177.9(b)(1), the ruling will be subject to modification or revocation. In the event there is a change in the facts previously furnished this may affect the determination of country of origin. Accordingly, it is recommended that a new ruling request be submitted in accordance with section 177.2, Customs Regulations (19 CFR 177.2).
Sincerely,
John Durant, Director